The city's Campaign Finance Board has put Councilmember Margarita Lopez on notice that it is considering assessing penalties against her for alleged violations of fraud, misrepresentation and improper payments involving her 2001 campaign finances.

According to Andrea Lynn, deputy press secretary for the Campaign Finance Board, at a recent C.F.B. hearing, a list of alleged financial misdoings involving Lopez's 2001 campaign was read aloud as a lawyer representing Lopez listened. According to Lynn, the list of grievances included: making approximately $45,000 in impermissible post-election expenditures to individuals; apparent fraud and misrepresentation in connection with the impermissible post-election expenditures to individuals; making an impermissible $1,300 post-election expenditure to the AHONA Housing Development Fund Corporation; apparent fraud and misrepresentation in connection with the impermissible post-election expenditure to AHONA; apparent fraud and misrepresentation in connection with services purportedly provided by campaign workers for the general election; failure to maintain and to provide to the board upon request copies of the campaign's cancelled checks; apparent fraud and misrepresentation in connection with a subpoena the board issued the campaign bank, Lower East Side People's Federal Credit Union; and accepting a $500 contribution from an unregistered political committee. Lynn would not provide details of the list items - citing the fact that the audit of Lopez's finances is ongoing - but would say that the unregistered political committee was the Committee to Re-elect Nydia Velazquez. All committees must register with C.F.B. before making any contributions to candidates.

Congressmember Velazquez, who represents part of the Lower East Side and Brooklyn, is a close ally of Lopez, who represents the Second Council District, which stretches from the Lower East Side to Murray Hill. C.F.B. is the city agency that issues public campaign funds, under a 4-to-1 matching formula, to candidates whose fundraising meets the board's criteria. Public funds are only allowed to be spent on qualified expenses, as determined by C.F.B. Any public funds left unspent after an election are supposed to be returned to the board. The board has jurisdiction to assess civil penalties for violations of the campaign finance laws, but doesn't prosecute crimes. As of now, these are civil penalties, Lynn said. This is all the board considers when assessing penalties. As to whether there was any criminality involved, Lynn said, that would be for a district attorney to consider.

Lopez declined to comment on the matter, referring questions to attorney Jerry Goldfeder.

You need to talk to my lawyer, she said on Wednesday evening. The only thing that you need to do is to talk to him.

Goldfeder, a well-known, politically connected Upper West Side election lawyer, was recently retained to represent the 2001 Lopez campaign. He said the C.F.B. is off base in their charges, and he offered answers in response.

All payments were made properly, Goldfeder said. All records were submitted to the Campaign Finance Board. Anyone who worked for the campaign was paid on a timely basis.

Specifically, Goldfeder said, no one was paid after the election.

They were paid on Nov. 6, he said, noting that some payments were mailed and some hand delivered. The board appears to be confused, because not everybody cashes a check immediately, he noted. And so, they infer that we paid them for work after the [election]. These people worked on Election Day and they were paid on Election Day.

Goldfeder said he has the list of Lopez campaign workers, which has not been made public by C.F.B., and that the overwhelming majority of individuals were paid less than $100. He declined to release this list to The Villager.

As for the disputed $1,300 payment to AHONA, Goldfeder said this was rent for a ground-floor space in the East 11th Street building in which Lopez also has a co-op apartment. The space, which had been vacated in June, was used for two months as one of Lopez's several campaign headquarters, he said.

Regarding the bank subpoena, the attorney said C.F.B. is claiming Lopez told them she never received it. Yet, he said, it was the bank that was subpoenaed and which did provide the records regarding cancelled checks to the board. Like many banks, the credit union doesn't send customers their cancelled checks, so records must be consulted instead, he noted.

On the subject of the $500 contribution from the Committee to Re-elect Nydia Velazquez, Goldfeder said, The $500 was returned - it was a mistake and it was returned.

Goldfeder said the use of the word fraud by C.F.B. is simply a bootstrap term the board uses when it doesn't accept a candidate's defense of his or her expenditures - or when They don't believe you, and then they say that you're lying. Lopez received $143,682 in public funds for her 2001 Council re-election campaign. In August 2005, Lopez paid $185,877 to C.F.B., representing the highest likely amount of any liabilities for her 2001 campaign, the amount representing both total public funds plus potential penalties. About 10 friends and political allies - including Michael Rosen of East Village Community Coalition, housing activist Frances Goldin and former Community Board 3 Chairperson Lisa Kaplan - put up the majority of the payment to C.F.B., with Lopez paying the rest, in return for which C.F.B. allowed Lopez to get $453,745 in matching funds for her recent primary campaign for Manhattan borough president, in which Lopez finished in third place. The payment was described as a protection to the taxpayer by C.F.B. If Lopez is cleared of any financial wrongdoing, she'll get the payment back. If not, the board may keep the entire payment. As collateral for the $165,872 Lopez's friends loaned her as a guarantee so she could get her '05 matching funds, she put up her mortgage on her Sullivan County country house and East Village co-op apartment.

Margarita was so incensed when she got this bogus notice on Aug. 1 that she decided to pay all the money they asked for, as long as she retained the right to contest these allegations, Goldfeder said. If she thought for a moment there was validity to any of this she would not have given the board the $185,877 [payment in August] in good faith.

According to an East Village sources, rumors are swirling that Lopez's '01 campaign financial records and worker and volunteer records are missing. But Goldfeder, noting he was only recently retained to represent the Lopez '01 campaign, said, I don't know anything about that. He would not say when he started representing the campaign, other than to say recently. He refused to provide the financial records to The Villager and refused to confirm whether the financial records have been destroyed.

I never heard of this issue, and I'm not going to do your work for you, Goldfeder told The Villager, saying he would not make any phone calls to verify whether the financial records exist. The Campaign Finance Board is not alleging that [the records have been destroyed] - I am not going to make phone calls for you.

The source, a volunteer on Lopez's '01 campaign and member of her political organization - Coalition for a District Alternative - said he received a check from the campaign for $200. He hadn't been expecting it since he was only a volunteer - but he cashed it. In addition, the same rumors are saying a large payment to Johnson may have been dubious. However, Goldfeder said Johnson was a campaign employee, so payments to her would not be inappropriate. After Lopez was notified by C.F.B. in August, she requested that her audit be put over until October, after the borough president primary. Last week, Goldfeder requested another extension. Goldfeder was scheduled to submit written responses to C.F.B.'s charges on Nov. 3, and the finance board will address the issues involving Lopez's '01 funds at a hearing on Nov. 16, Lynn said. The board will go into a closed-door session after the hearing and may or may not make a final decision at that time. Lopez will be term-limited out of the Council at the end of this year. Asked on Tuesday if she plans to run for Steve Sanders Assembly seat after his recent announcement that he will resign from the Assembly at the end of this year, Lopez said right now she's focusing on helping getting Mayor Bloomberg re-elected. It's also been rumored that Lopez might seek a position in a second Bloomberg administration.